The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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The Bright Side of Internal Capital Markets
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00377
Naveen Khanna, Sheri Tice
We examine capital expenditure decisions of discount firms in response to WalMart's entry into their markets. Before WalMart's entry, focused incumbents and discount divisions of diversified incumbents are similar in size, geographic dispersion, and firm debt levels. However, discount divisions of diversified firms are significantly more productive. After WalMart's entry, diversified firms are quicker to either exit the discount business or stay and fight. Also, their capital expenditures are more sensitive to the productivity of their discount business. Internal capital markets function well, as transfers are away from the worsening discount divisions. It appears diversified firms make better investment decisions.
Does Stock Liquidity Enhance or Impede Firm Innovation?
Published: 06/20/2014 | DOI: 10.1111/jofi.12187
VIVIAN W. FANG, XUAN TIAN, SHERI TICE
We aim to tackle the longstanding debate on whether stock liquidity enhances or impedes firm innovation. This topic is of interest because innovation is crucial for firm‐ and national‐level competitiveness and stock liquidity can be altered by financial market regulations. Using a difference‐in‐differences approach that relies on the exogenous variation in liquidity generated by regulatory changes, we find that an increase in liquidity causes a reduction in future innovation. We identify two possible mechanisms through which liquidity impedes innovation: increased exposure to hostile takeovers and higher presence of institutional investors who do not actively gather information or monitor.